Grant Frear: The leadership challenge

Innovation is often seen as a critical component of any growth strategy. It is also an equally important component in the basic survival of an organisation and a strategy with a critical role to play in risk management and building a sustainable business, explains Grant Frear

Grant Frear is head of Innovation at Deloitte. Photo / File

Undertaking innovation within an established business feels a bit like living life on the edge.

The recent demise of Kodak illustrates quite clearly how important the ability to successfully innovate and change is. For Kodak, it was clear that there was limited time left for film and photographic printing. Despite having created a leadership position very early on in digital photography, they simply could not maintain the level of innovation required to keep up with the disruptive changes happening in their market.

Similarly Borders, at one time the second-largest bookseller in the world, could clearly see the fundamental changes happening in their industry. But a focus on maintaining their core "bricks and mortar" business and a lack of innovation in digital channels saw a rapid demise of a once-great Fortune 1000 company.

The case for disruption was recently explored in detail in an in-depth analysis of the powerful force of digital disruption on all industries. This Deloitte report looked at the impact that digital technologies are having on a wide range of businesses.

The central premise being that digital disruption is inevitable, the only question for businesses is how soon it will occur and how big the impact will be.

Undertaking innovation within an established business feels a bit like living life on the edge. Whether your goal is to keep pace with your industry, commonly known as sustained innovation, or leap ahead through disruptive innovation you will be moving into uncharted territory.

Our team at the Centre of the Edge has produced a report that focuses on a number of strategies to help leaders embrace innovation on the edge of their organisations and respond to the big shifts present in their industry.

We refer this this approach as Scaling Edges and advocate that the best strategy is to identify opportunities on the edge of your current business model, to invest and scale these opportunities, and over time integrate them into the core of the business.

Continued below.

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The mode of thinking required to successfully embrace innovations on the edge at first seems counter-intuitive and for many organisations will be counter-cultural. This mode of thinking and the approach advocated through our research is deliberately different. The approach recognises the barriers to change within organisations are huge (referred to as the "Great Wall" in our research). Given that innovation even within mature and established businesses so often withers before delivering any value, the approaches proposed are intended to take on a more radical feel.

The approach, summarised in the diagram above, starts on the edge of an organisation and looks out. This provides a very real contrast to continuous improvement programmes that seek to improve the current modus operandi. The next departure from the more 'traditional' approaches lies in prototyping. There are no business cases for being out on the edge. Innovation from the edge instead requires you to build in order to learn. Then, having proved the concepts, it is time to scale. The real risk for organisations at this point is getting bogged down.

This is where speed is important, and where trajectory is more important than position. The central premise of this approach is the acknowledgement of the risks associated with innovation, particularly when tackling the core of your business. By picking innovations on the edge that have the potential to transform the core we think organisations will have much more success with innovation. By taking an approach that fits well with life on the edge we think organisations can successfully demonstrate the potential of edge innovations. By moving at speed we think organisations can overcome resistance to change.

In our experience we have found that leadership and culture are two of the most critical elements to getting this right. In the large majority of organisations the tone is set at the top. Leadership teams do not need to be the best innovators in the company but they do need to be supportive. In both their communications and their actions they can unleash innovation within an organisation or they can quickly squash it, particularly through actions.

Given the economic environment in which New Zealand business has been operating from some time innovation is a leadership challenge which is essential to tackle; though its rewards are not as immediate as a "cost reduction" initiative they tend to be longer-lasting and more fundamental in nature.